Prime Minister Tansu Ciller survived a succession of political crises in 1995, but in December parliamentary elections (due originally in October 1996) left the pro-Islamic Welfare Party as the single largest bloc, with 158 of the 550 seats. The leader of the Welfare Party, Necmettin Erbakan, had based the election campaign on opposition to secularism in Turkish political life. He had decried "the yoke of the West" and promised to create Islamic counterparts to NATO and the European Union. Ciller remained at the head of a caretaker government as her centre-right True Path Party (DYP) negotiated with its archrival centre-right Motherland Party to prevent the Islamists from taking power.

The ruling coalition of Ciller’s DYP and the centre-left social democratic parties had been threatened repeatedly by the attempts of the social democrats to assert themselves and regain some of the popular support lost by their acquiescence in unpopular government decisions. On February 18 the Social Democratic Populist Party (SHP) and the smaller Republican People’s Party (CHP) voted to merge, adopting the latter’s name. Hikmet Cetin, a former foreign minister, was elected to the leadership of the united party, replacing Murat Karayalcin, while the former SHP leader, Erdal Inonu, became foreign minister when the CHP team of ministers was reshuffled on March 27. At a party convention on September 10, Cetin lost the leadership to Deniz Baykal, the leader of the CHP before the merger. Ten days later Baykal withdrew his support from the coalition. Ciller formed a minority administration, relying on, among others, Alpaslan Turkes, leader of the extreme right-wing Nationalist Action Party, and Bulent Ecevit, leader of the left-wing nationalist Democratic Left Party. Ecevit withdrew his support when Ciller failed to resolve a strike of public-sector workers, and the minority government, which took office on October 5, was defeated in a vote of confidence on October 15. The following day the prime minister patched up her differences with Baykal and agreed to revive the DYP-CHP coalition. The new government took office on October 30, after parliament had scheduled elections on December 24 and passed an electoral law accommodating changes in the constitution, which lowered the voting age from 21 to 18, gave the vote to Turks living abroad, and increased the size of the parliament from 450 to 550 members.

The constitutional amendments, which also increased trade-union rights and widened political participation, sought to meet the demands for democratic reforms voiced by European Union foreign ministers on March 6 when they agreed to implement a customs union with Turkey on Jan. 1, 1996. The decision was approved by the European Parliament at its meeting on December 13.

On October 26 four of the imprisoned deputies of the dissolved Democracy Party, which championed the views of radical Kurdish nationalists, were freed on appeal, but the court confirmed the sentences of 15 years’ imprisonment passed on four others convicted of involvement in the armed campaign waged by the Kurdish Workers’ Party (PKK). The death toll since the start of the insurgency in 1984 exceeded 20,000 by the end of 1995. On March 20 Turkish forces launched a major incursion into Kurdish areas of northern Iraq and destroyed PKK camps before withdrawing two months later. They returned in smaller numbers in the autumn in an effort to end the fighting between rival militias and establish some security in the area.

The decision by the Azerbaijani oil consortium to export early production through both Russia and Georgia was hailed as a victory by Turkey, which intended to link the Georgian route to the existing pipeline from Iraq to the Gulf of Iskenderun. U.S.-Turkish cooperation, which made this decision possible, was further reinforced when, at U.S. prompting, NATO launched air strikes against Bosnian Serbs, a course long advocated by Turkey. Pres. Suleyman Demirel, who visited the Turkish contingent in Bosnia and Herzegovina in March, reached agreements with Bosnia and Croatia when he attended a UN meeting in October. Both Demirel and Ciller cultivated relations with the Turkic Central Asian countries. Visits to all these republics, as well as to Tajikistan and Mongolia, led up to the Turkic summit in Bishkek, Kyrgyzstan, in August.

Before leaving the scene, the minority government settled the public-sector strike, at the cost of $1.3 billion in wage increases. Civil service salaries and pensions also were raised. Living standards had dropped sharply as a result of the austerity program introduced in April 1994, which had led to a record drop of 6% in the gross national product (GNP) in 1994. After stagnating in the first quarter of 1995, however, the GNP jumped by 12% in the second quarter. The foreign trade deficit doubled to over $6 billion in the first seven months of the year, while consumer prices rose by 52% by the end of September. The government imposed a levy on foreign supplier credits while negotiating new performance targets with the International Monetary Fund, which had backed the austerity program.